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Customer loyalty - dealers and customers win

17 Jan 2013IHS Markit Automotive Expert

For the US automotive industry, superior customer loyalty was recognized this week. I had the pleasure of watching our customers receive the annual Polk Automotive Loyalty Awards in Detroit as part of the overall activities surrounding the 2013 NAIAS (North American International Auto Show). It's a great feeling knowing OEMs and their dealer networks are working like crazy to make the buying and vehicle ownership experience richer, truer and highly relevant for their customers.

As in past years, we recognized automakers in 16 different categories based on having the highest percentage of prior new owners return to buy another new vehicle from them. Ford Motor Company as a whole did quite nicely this year. Polk also recognized the most improved brand for owner loyalty ... let's hear it for Volkswagen!

Outside of formal recognition to US automakers, I thought you'd appreciate a few interesting and lesser-known facts that Polk has garnered around customer retention. If you missed the ceremony, we call these our "5 facts in 5 minutes."

Fact #1: More consumers came back to buy in the 2012 model year than in the prior year. Polk saw 5.9 million new vehicle owners return to buy or lease another new vehicle between October 2011 and September 2012. This is based on actual vehicle registrations, not surveys. That's roughly 400,000 more returning owners than what we reported in the prior model year. Conclusion? Sales are up and prior owners certainly contribute to the industry's overall growth.

Fact #2: 48% of owners stay with the same brand (i.e., make) when buying another new vehicle. This trend has been relatively stable for the last couple of years. It has grown 4 percentage points from earlier, which tells me that automakers, on the whole, are improving their retention efforts.

Fact #3: Nearly one in five (19%) of the 5.9 million returning owners who bought another new vehicle came from three minority groups. This was comprised of Hispanics (9%), African Americans (6%) and Asian Americans (4%). Take a look at the automakers and their marketing teams - many have dedicated agencies of record to help sell and appeal to specific minority communities. This is a smart move given the increasing buying power and diverse ethnic changes in America.

Fact #4: Three automakers represented nearly 50% of all returning owners ... GM, Toyota and Ford had the largest number of returning customers re-entering the new vehicle market in the 2012 model year.

Fact #5: Loyalty rates decline after the 3rd year of ownership and continue to decline after the fourth year, and every year after that. Polk has studied this for a while and it's a counter-intuitive fact at first glance ("Why would I switch if I've owned the car for so long?"). Yet when you think about it, don't we get bored with the experience of having the same car or truck after a while? Why do you think leasing is so popular (roughly 20% of all US sales)? Leasing keeps you with a fresh vehicle and it keeps you coming back more frequently – two keys to building customer loyalty.

Again, congratulations to all of the winners this year. Customers and dealers win when an auto company takes the extra effort. Here's to continued success in 2013!